P&G Posts Strongest Sales Growth in Five Years -- 3rd Update

By Aisha Al-Muslim 

Procter & Gamble Co. booked its strongest quarterly sales growth in five years, driven by gains in the beauty segment, as the consumer-products giant snapped a stretch of lackluster growth.

The maker of Tide detergent and Gillette razors said organic sales, a closely watched metric that strips out currency moves, acquisitions and divestitures, rose 4% in the fiscal first quarter. Beauty products fueled the gains, rising 7%, but the company reported growth across a number of categories including shaving razors, health care and laundry detergent.

P&G executives said Friday the growth came from increased demand, not the company's recent decision to increase prices on some items. Jon Moeller, P&G's finance chief, said the company raised prices in some emerging markets to offset currency swings but that overall prices were neutral in the September quarter. Shipment volumes rose 3% from a year ago.

Despite the strong start to its fiscal year, P&G executives sought to tamp down expectations and stuck with their full-year forecast for organic sales to rise 2% to 3%. Mr. Moeller said he would refrain from calling it a "breakout quarter."

The company now estimates overall sales to be down 2% for the full year due to foreign-exchange headwinds, compared with the previous outlook of flat to up 1%.

Shares rose 5% to $84.24 in premarket trading Friday. Shares are down 12.4% in the past year.

The Cincinnati-based company has struggled to boost sales in an industry facing more competition and higher costs of raw materials and transportation. In recent quarters, the company's organic sales have generally risen 2% or less. They rose 1% in the fiscal year ended June 30, below the company's goal of 2% to 3%.

After more than a year of trying to combat weak demand by lowering prices, P&G recently changed course, saying it would charge more for its Pampers, Bounty, Charmin and Puffs brands. The increases, which the company said would go into effect later this year or in early 2019, have the potential to more broadly influence pricing and demand given P&G's size and clout. P&G said pricing, overall, was neutral during the quarter.

P&G posted a 4% gain in organic sales in its long troubled grooming business, where Gillette has lost market share to online upstarts like Dollar Shave Club. The only P&G segment that reported a decline in organic sales was the baby business, which includes Pampers and Luvs diapers.

Consumer-products makers got a boost this week when Unilever PLC and Nestlé SA said inflation in many markets allowed them to charge more for their products, fueling stronger sales for those companies in the latest quarter. Many consumer-goods makers in recent quarters have struggled to raise prices amid weak inflation, but commodity-price increases and a stronger U.S. dollar have changed that.

P&G said profit rose 12% to $3.2 billion, or $1.22 cents a share, in the first quarter, which ended Sept. 30. Core earnings were $1.12 a share, beating the $1.09 a share analysts polled by Refinitiv were looking for.

Net sales rose 0.2% to $16.69 billion from $16.65 billion, but unfavorable foreign exchange fluctuations hurt sales by 3%.

The company's earnings results were impacted by unfavorable foreign-exchange fluctuations due to the strengthening of the U.S. dollar, which hurt sales by 3%.

P&G also maintained its expectation for core earnings-per-share growth of 3% to 8% for fiscal 2019. The outlook includes an estimated $1.3 billion headwind from foreign exchange and higher commodity costs.

Write to Aisha Al-Muslim at [e-mail]

(END) Dow Jones Newswires

October 19, 2018 09:49 ET (13:49 GMT)

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